GM could drive next big political debate

Taxpayers will now own 60 percent of the new General Motors, now being called by some "Government Motors," but the president wants the government to take a hands-off approach. The GM bankruptcy represents a big gamble for the president and his party.

President Barack Obama has been able to sidestep much of the political pain associated with the economic crisis by saying they inherited it from the previous administration. Regardless, the bankruptcy restructuring of Chrysler and General Motors lies on Obama's shoulders.

Obama tried to silence critics of the General Motors bankruptcy by starting Monday morning's speech talking about Chrysler.

"Keep in mind many experts said that a quick surgical bankruptcy was impossible. They were wrong," said Obama.

And he says critics of the Chrysler deal were also wrong about the stigma of bankruptcy scaring away customers.

"In fact, Chrysler sold more cars in May than it did in April," said Obama.

"In fact if all goes according to plan, the share of GM cars sold in the United States that are made here will actually grow for the first time in three decades," he said.

Many of those jobs will be in key swing states of Michigan, Ohio, Indiana and Wisconsin. If it works, the president and his party will be in good shape going into the 2010 mid-term elections.

"If Obama's borrowing of 46 cents on the dollar works, I'll eat my hat," said Walnut Creek attorney Tom Del Beccaro, the Vice Chair of the California Republican Party. "Even Obama's people think there will be 10 percent unemployment next year. That's not good when he was promising change."

The GOP is already putting together ads to go after the president on the GM bankruptcy plan. ABC7's political analyst professor Bruce Cain Ph.D. says there are significant risks.

"Risk number one is you're pouring money down a rat hole," said Cain.

If the president's plan eventually requires more than the $30 billion, Democrats will suffer. Risk number two, a Democratically-controlled Congress decides to second-guess GM's management.

"Where to locate factories, which ones to close down, what kind of products to produce," said Cain in reference to some questions that will be raised.

Monday the president seemed to anticipate that point by saying, "Our goal is to get GM back on its feet, take a hands-off approach, and get out quickly."

The lines are clearly marked. Both parties are staking their positions on an economic issue that could drive the next election.

"What they've chosen to do is take very different positions, both of which have risks, but for the Republican Party, with nothing to lose, their risks are less than for the Obama Administration," said Cain.

When Cain says the Republicans have nothing to lose, he's speaking in the sense that Democrats have the White House and both houses of Congress. But Republicans could find themselves even further in the wildness, if they're strategy fails.